Judd W. Patton, Ph.D. (Biography) Bellevue University Online
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The Biblical Case Against Inflation

Dr. Judd W. Patton
(Originally Written in June, 1983)

Freeman readers, since 1946, have come to understand that inflation is an increase in the quantity of money issued by government. Inflation is emphatically NOT higher prices!  Higher goods’ prices are one of the inevitable consequences! They have come to understand that the U.S. dollar is not based on the principle of In God We Trust, but is premised on In Government We Trust. The dollar is Caesar’s money, hardly Godly or Biblical money, the noble maxim notwithstanding.

Henry Hazlitt has put his finger on the ultimate problem: “Inflation is itself an immoral act on the part of government. When modern governments inflate by increasing the paper-money supply, directly or indirectly, they do in principle what kings once did when they clipped the coins.  Diluting the money supply with paper is the moral equivalent of diluting the milk supply with water.”1

So very few understand Hazlitt’s three sentences. The vast majority of contemporary economists certainly do not.  Most continue to expound the supposed virtues of an elastic supply of paper money and credit in solving economic ills. They frequently argue among themselves over the rate of expansion while the more conservative economists among them prefer to expand the money supply more steadily and smoothly. None wish to halt it.2

Fewer still recognize the morality, or should it be said the immorality, of inflation.  Indeed the morality of economic actions in general, and inflation in particular, continues to be the “missing dimension” of economic science and analysis. Few understand that the economic world is governed by spiritual laws.

It is the purpose of the article to articulate the morality or “missing dimension” of inflation. The Biblical case against inflation is that it is sin. It violates the commandments of God. And since sin IS the transgression of God’s law (I John 3:4), and the wages of sin is death (Romans 6:23), should it be surprising that the dollar, and the currencies around the world, are dying?

Only this spiritual side of inflation reveals the real cause of the world’s seemingly intractable disease. Only it reveals the lasting solution.

Biblical Money

Throughout the Bible, money is shown to be a certain weight of either gold, silver, copper or brass. A few references will suffice to establish this fact.3

Jeremiah the prophet bought a field from his uncle’s son. “and weighed out to him the money – seventeen shekels of silver” (Jeremiah 32:9). As a shekel was a little less than one-half troy ounce, this was about eight ounces.4 Joseph was sold by his brothers for twenty shekels of silver (Genesis 37:28).  David used both gold and silver.  He bought a threshing floor, oxen, and implements for fifty shekels (about two pounds) of silver (II Samuel 24:24), but for the mountain upon which the threshing floor was located, Mt. Moriah, he paid six hundred shekels (twenty-six and one-half pounds!) of gold (I Chronicles 21:25).

In the New Testament, the prophecy that the Messiah would be betrayed for thirty pieces of silver (Zechariah 11:12) was fulfilled when Judas Iscariot did in fact receive thirty silver coins, each one a shekel in weight (Matthew 26:15; 27:3). Coins had replaced the equal-arm weighing balance. Lastly, notice the use of all three commodities as monies: “Provide neither gold nor silver nor copper in your money belts” (Matthew 10:9).

Biblical Definition of Inflation

God requires that all commercial and financial transactions be made in terms of honest weights and measures.  He therefore defined precise units of account for length, weight, and volume transactions (Ezekiel 45:9-12), and commanded that, “You shall do no injustice in judgment, in measurement of length, weight, or volume (Leviticus 19:35).  He even promised the blessing of long life for obedience to His standards (Deuteronomy 25:15).5

However, use of the equal-arm weighing balance permitted three basic ways a merchant could defraud another person.  One could: (1) “rig” the balance itself, (2) use stones or weights that are not the inscribed weight, or (3) weigh out a debased money, mixed with inferior metals, against a legitimate weight. But God made it abundantly clear that, “For all who do such things, and all who behave unrighteously, are an abomination to the LORD your God (Deuteronomy 25:16).  See also Deuteronomy 25:13 -15, Proverbs 11:1, and Proverbs 16:11.

Since righteousness is defined as keeping the commandments (Psalms 119:172), falsifying the balance by monetary debasement (#3 above) is an unrighteous, fraudulent act outlawed by the eighth commandment against stealing. God outlawed monetary debasement (inflation) and any other form of it by the Ten Commandments.

Yet the Bible records numerous references for our benefit about the unheeding Israelites.  They suffered the effects of higher goods’ prices by dishonestly increasing the quantity of money. Notice Isaiah 1:22: “Your silver has become dross, your wine mixed with water.”  Dross is the scum on the surface of molten metal. Ignoring God’s directives, the Israelites had resorted to the fraudulent activity of mixing their silver money with inferior metals, thus increasing the supply dishonestly and prices accordingly.

The prophets Amos and Micah record scathing indictments: “Hear this, you who swallow up the needy, and make the poor of the land fail, ... Making the ephah [grain measure] small and the shekel large [by debasing the money so more of it was needed to buy a given product thereby causing consumers to pay higher shekel prices], falsifying the balances by deceit, that we may buy the poor for silver, and the needy for a pair of sandals, even all the bad [inferior] wheat (Amos 8:4-6).  In Micah 6:10-11 we read: “Are there yet the treasures of wickedness [inflation and/or fraudulent gains] in the house of the wicked, and the short measure that is an abomination? Shall I count pure those with the wicked balances, and with the bag of deceitful weights?”

Now it is possible to understand James 5:3: “Your gold and silver are corroded, and their corrosion will be a witness against you and will eat your flesh like fire.” Gold and silver do not rust!  Could James be referring to such severe monetary debasement (hyperinflation), that the whole society is brought down?  Read verses 1-3.  It seems crystal clear that the Biblical definition of inflation is monetary debasement.

Notice one final reference to inflation in Haggai 1:6-7, “And he who earns wages, earns wages to put into a bag with holes.  Thus says the LORD of hosts:  “Consider your ways!”  What an apt analogy to describe the effects of inflation, a bag with holes!  With a purchasing power of fourteen cents of the 1940 dollar, it is blatantly obvious that the dollar is holely, not holy! Caesar’s monies are inflated. God’s money is not.

Consequences of Breaking the Eighth Commandment

Inflation is a sin. It breaks the eighth commandment by stealing or defrauding others, analogous to the activity of a counterfeiter. Morally then monetary debasement is fraudulent, whether legalized by government or not. There are many evil consequences.

The most visible, devastating economic effects include: (1) generally higher goods’ prices (what the public confusingly labels as “inflation”); (2) a redistribution of income and wealth from the real producers to the inflation recipients; and (3) the ups and downs in business activity known as the business cycle.  Let’s look at these consequences in turn.

First, however, it needs to be pointed out that monetary debasement is no longer limited in the twentieth century to mixing less valuable, inferior metals into gold or silver (remember our silver coins prior to 1964?) or coin clipping.  Rather, modern-day monetary dilution or debasement occurs when governments increase their money supplies (which includes currency and coin, checking accounts and savings accounts) beyond their stock of gold or silver. Both in principle and effects this expansion of Caesar’s money is equivalent to actual money debasement as it necessarily victimizes some individuals at the expense of others.

Modern-day inflation does not represent or coincide with the production of real goods and services. Thus this additional money, when spent by the recipients, will tend to bid prices up of the commodities or services demanded.  As a result prices will rise, but not uniformly.

Furthermore, as inflation permeates or works its way throughout the economy, the first recipients will benefit the most.  As a result the distribution or ownership of wealth is altered.  In the absence of inflation, income and wealth accure, at least in a free market, to those who produce them. But God demands righteous dealings in the marketplace (Jeremiah 17:10; Revelation 22:12). Inflation redistributes income in a manner unrelated to a person’s economic contribution to production.

Another aspect of the unrighteous redistribution of income due to inflation concerns creditor-debtor relationships. Inflation tends to benefit debtors at the expense of creditors.  Debtors can pay off their loans in depreciated money. Moreover, if inflation becomes a continuous government policy, creditors will endeavor to reduce their “gifts” to the debtors through higher interest rates. These higher interest rates will then tend to retard long-term capital investment and capital formation, lowering the standard of living of society in comparison to what it would have been in the absence of the inflation-induced higher interest rates. 

Such are some of the major effects of violating the eighth commandment.  Inflation is hardly a means to love your neighbor as yourself (Mark 12:31).

Why the Business Cycle?

Most theft, like the successful counterfeiter, requires misrepresentation. His fraudulent bills pass as genuine. Similarly and biblically, inflation also bears false witness. It is not what it appears to be. Inflation clearly violates the ninth commandment (Exodus 20:16), while simultaneously breaking the eighth.

The false witness manifests itself initially through interest rates, and then into the whole price structure. As the newly created money enters into the loan market, known economically as credit expansion, interest rates are forced lower than real market conditions would warrant. These artificial, falsified rates then mislead entrepreneurs in their calculations as to which projects, processes, products, and technologies appear profitable.

A brief economic “principle's” lesson seems necessary at this point.  The economic problem of any society is to coordinate the plans and purposes of its individual members into an overall integrated production network. The decisions of the entrepreneur-producers must “mesh” with the decisions of other producers and obviously with consumer wants. In the market it is the price system, along with profit and loss, that performs this essential communication, coordination role. Only through market-reflecting and market-clearing prices can any economy be fitly joined together (Ephesians 4:16).

Interest rates, as an integral part of the price system, synchronizes the whole production order from the raw material suppliers to the manufacturers to the retailers and finally to the consumers.  Like any price, interest rates must be free to tell the truth. Market conditions must either be reflected in their movements, or else shortages and surpluses will result. The plans and purpose of market participants will only be molded together to the extent interest rates reflect supply and demand conditions that exist in reality.

Now back to the business cycle. Credit expansion appears to increase the supply of savings to the market. This greater supply of monetary savings, not real savings, will lower interest rates lower than they otherwise would have been.  In its absence, entrepreneurs would have faced higher market interest rates, which entail different production decisions. Therefore the artificial rates discoordinate or dissynchronize entrepreneurial production plans from consumer spending-saving preferences. The result is that entrepreneurs are led to believe the market desires more production later (through greater saving), when in fact this is not the case! Therefore entrepreneurs embark on some production plans that eventually will prove to be unsustainable and unprofitable.6

Nowhere is the crux of the economic problem of the business cycle more aptly described than by Ludwig Von Mises: “The whole entrepreneurial class is, as it were, in the position of a master-builder whose task it is to erect a building out of a limited supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He oversizes the groundwork and the foundations and only discovers later in the progress of the construction that the lacks the material needed for the completion of the structure. It is obvious that our master builder’s fault was not over -investment, but an inappropriate employment of the means [land, labor, and capital] at his disposal.”7

Interestingly, the business cycle is described in a similar fashion in Luke 14:28: “For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it?  Lest, after he has laid the foundation, and is not able to finish it, all who see it begin to mock him....”

The essence of the business cycle should now be clear. Inflation or credit expansion breaks the ninth commandment and thereby causes market entrepreneurs to miscount or misjudge the real cost of their “towers” or investments. Market conditions do not warrant many of these projects. There is insufficient land, labor, and capital available to complete all production plans. Malinvestments necessarily will be made. Consequently there must be an inevitable readjustment period, known as a recession or depression, that will liquidate the distortions generated by the credit expansion, and so restore coordination and economic harmony. The recession is in reality the healing phase where the errors caused by the interest rate deception are purged.

Is it any wonder a painful, high unemployment readjustment period is absolutely necessary?  Failure to count the cost accurately leads to a cluster of business errors causing the whole production order to be out of joint, or discoordinated, no longer fitly joined together (Ephesians 4:16). The bust or recession constitutes the painful means to restore fit and synchronization to the economy.  False witness bears bitter fruit.

Inflation breaks All the Commandments

According to James 2:10, “For whoever shall keep the whole law, and yet stumble in one point, he is guilty of all.” In other words, all the commandments are interrelated.  Inflation, by violating the eighth and ninth commandments on stealing and false witness, reacts and relates to each of the Ten Commandments.

Howard Kershner has astutely observed this relationship: “Throughout history periods of sound money [little or no inflation] have been marked by moral advance and prosperity.  Conversely, periods of unsound money have been accompanied by moral incline.”8 It might be noted, as well, that unsound money has been accompanied by economic stagnation.

Why should this be so?  The answer is that inflation, especially continuous inflation, leads individuals, in their effort to cope with its effects, to disregard all of God’s commandments.  The principle involved is that a “little leaven leavens the whole lump” (I Corinthians 5:6). The inflation sin of the leaders impacts on the rest of society.  Look up Isaiah 9:16. Such a society becomes “get” oriented and unrighteous in their dealings and actions. Immoral actions do not generate prosperity but rather generate poverty.

Henry Hazlitt describes it this way: “Inflation tends to demoralize those who gain by it even more than those who lose by it. The gainers become used to an unearned increment. They want to keep their relative gains....(Matthew 6:24). The profiteers from inflation tend to spend freely, frivolously, ostentatiously. This increases the resentment of those who have been less favored.”9

Continuing, Hazlitt concludes: “Inflation makes it possible for some people to get rich by speculation and windfall instead of hard work. It rewards gambling and penalizes thrift.  It conceals and encourages waste and inefficiency in production...It promotes speculation, gambling, squandering, luxury, envy, resentment, discontent, corruption, crime, and increasing drift toward more intervention (perhaps wage and price controls) which may end in dictatorship.”10

Now consider how inflation, by violating the commandments against stealing and false witness, produces a chain-reaction with God’s eight other laws.

First, it seems axiomatic that stealing must begin as covetousness, a violation of the Tenth Commandment (Exodus 20:17).  Further, those who steal, lie, and covet necessarily have elevated the self above the true God, thereby violating the First and Second Commandments (Exodus 20:3-6).  Indeed, inflation can only come into existence by a rebellion against God, ignoring Him and His immutable Spiritual laws (Mark 12:30).  Those responsible for inflating have put another “god” in preference to or in place of the true God.

The chain reaction continues as the victims of inflation find it easier, given their deteriorating circumstances, to trample on God’s Holy time (Exodus 20:8-11). Contrary to God’s instruction, the Fourth Commandment is no longer remembered. Notice this attitude in Amos 8:5. Inflation victims may even wonder why God has forsaken them, perhaps even cursing Him or using His name in a vain way (Exodus 20:7).

Inflation dishonors our Spiritual Father in heaven, hence the Fifth Commandment is broken (Exodus 20:12). Moreover, inflation also tends to dishonor ones physical parents as well.  By consuming savings and pensions, inflation can destroy the hopes, life-long dreams, and plans for financial security and economic independence. What a degrading way to end one’s latter years, as a financial liability dependent on others or one’s children, when one should have been able to enjoy the fruit of one’s life efforts. Frankly, God desires “ a good man” to be able to leave an inheritance to his grandchildren (Proverbs 13:22).

The squandering, waste, and impoverishment generated by credit expansion will tend to weaken family ties as mothers will be forced to seek employment outside the home to maintain the family standard of living. Children subsequently lose the indispensable training in right values they need from their parents. This lack of training may encourage, among other things, general permissiveness and violation of the Seventh Commandment against adultery (Exodus 20:14).

Finally, as noted previously, inflation promotes resentment, envy, and discontentment.  As a result, individuals break the spiritual intent of the Sixth Commandment against murder even if they do not commit the overt act (Exodus 20:13).

Through inflation and credit expansion a society will be induced to break all Ten Commandments. But only a nation that obeys God will be blessed with economic prosperity (Psalms 33:12). That is why periods of sound, honest money are periods of economic prosperity while inflationary periods are marked by moral and economic decline.

The Optimum Quantity of Money

The purpose of this article has been to reveal the “missing dimension” or spiritual side of money and inflation. The conclusion thus far is that any monetary debasement, which includes ANY increase in government fiat money (currency) or its substitutes, is an immoral act condemned by God’s law. The penalty brings many economically counterproductive consequences.

Yet, many may have wondered if the quantity of money must remain fixed forevermore.  The answer is no. Under God’s law, commodity money is like any other desired good.  Its production will be governed by the expected profitability in producing it. But society never needs to be concerned about the supply of its monetary metals. No regulatory authority, like the Federal Reserve System, is needed to manage the money.  The optimum quantity of money is whatever exists.11

With a relatively small quantity of money in existence, an ounce of gold would be very valuable. That is, prices of goods would be very low. Conversely, a greater supply of money will lower the unit value of gold.  Prices of goods would be higher. What this means is that the price structure adapts itself to the quantity of money in existence.  Indeed, that is why inflation causes higher prices.

This does not mean, however, that trade and economic growth will somehow be hindered. Just the opposite! Without credit expansion and its malinvestments, capital formation and productivity will be enhanced greatly. As long as prices are free to adjust to market conditions, trade and employment can expand without any practical limit. With rising productivity, goods’ prices will generally tend to decline. This will then signal more gold production which tends to counterbalance or stabilize the overall price structure.

Commodity money production does not violate any spiritual laws.12 Gold or silver production does not entail any redistribution of income or wealth to non-producers. Gold producers receive their income by producing a product, gold, just like the producer of any good or service. Further, an increase in the available money supply will not falsify interest rates. Any new money saved and invested in the loan market reflects consumer preferences. No discoordination or falsification of interest rates occurs. Therefore no business cycle is generated.

Summary and Conclusions

The “missing dimension” of economic phenomena is that the success of economic activities are governed by the spiritual realm. Economic actions are always human actions, and the latter are always subject to right and wrong. Mankind must eventually come to understand this relationship if the curse of inflation that now engulfs the world, and for that matter, other economic curses, is ever to be resolved.

Inflation is wrong (evil) because it breaks God’s spiritual laws. God’s laws govern the universe (Hebrews 1:3).  And God has revealed that economic prosperity depends upon spiritual obedience (Deuteronomy 30:15-20). Since inflation, as has been shown, violates or leads to the violation of all Ten Commandments, it follows therefore that inflation will produce anything but economic prosperity.

The real problem of inflation is spiritual or moral in nature. Only economic analysis that has a Biblical foundation however, what may be called Biblical Economics, can generate this knowledge and understanding.

The economics of inflation is really quite simple. Don’t print more money.  Return to a full gold-coin standard.  Pull the plug on the printing presses. Yet our analysis makes it plain that a real, lasting solution must recognize the immorality of inflation.

The problem then is basically twofold to establish a lasting solution. First, the foundation or paradigm of modern day economic theory must be shown to the proponents to be erroneous.  Man’s reasoning as the sole source of knowledge and right and wrong, known as humanism, must be proved to be woefully deficient in its ability to grasp real economic relationships of cause and effect.

Modern economic science has ascribed to the Adam and Eve prerogative (Genesis 3:5). Like Adam and Eve, they have taken to themselves the right to determine the knowledge of what is good and what is evil. They do not believe God. They do not believe that God’s Word is the foundation of all knowledge.

The humanistic, carnal mind is hostile to God (Romans 8:7).  It is not subject to the laws of God. Therefore it cannot come to the knowledge of the relationship between spiritual and economic events. Its foundation will not permit the discovery of economic truth.

Indeed, to suggest to the scientific economic community today that their research must be grounded on the Bible, would undoubtedly be greeted with incredulity, sarcasm, scorn, and howls of laughter!  But to the humanistic individual, God says: “There is a way which seems right to a man, but its end is the way of death (Proverbs 14:12).  Inflation under humanistic direction will ultimately accelerate to hyperinflation and the death of the money!

In a humanistic framework, man becomes “god” and government becomes his agency to manage money and the economy. They experiment and choose, like Adam and Eve, those theories that have the greatest predictive power or highest statistical correlation. And based on these “facts,” they endeavor to formulate right and wrong policy, outside ethical deliberations!

A second and more closely related problem, even if the worldly economists could be convinced, is that a majority of people must come to grasp that the inflation problem is indeed a moral problem. A humanistic society will never tolerate Godly money. They will undoubtedly want some form of paper money.

The unholy bag of inflation can be patched up only when the Biblical paradigm replaces secular humanism as public policy. Frankly the outlook is not good to say the least.  But there is good news ahead! God has promised at some future date to put His laws into our hearts and minds (Hebrews 10:16).

Until that day, those that do have the understanding ought to profess it to those that have ears to hear, and to live it by not demanding our share of Caesar’s money from Caesar.


Notes and References

1Henry Hazlitt, What You Should Know About Inflation (Funk and Wagnalls, 1968), pp.131-132.

2The only exception would be Austrian economists.

3For those who may want to verify this fact beyond a shadow of a doubt, look up and study money in a topical bible.

4Rousas John Rushdoony, “Hard Money and Society in the Bible,” in Hans Sennholz (ed.), Gold Is Money (Greenwood Press, 1975), p. 159. All Bible quotations are from the New King James Version.

5A shekel was simply a unit of weight like our ounces and pounds. It means “to weigh – see Daniel 5:27” Since money had to be weighed out prior to the advent of coinage, is it surprising the name for the money became the shekel for the Israelites?  Many modern day currency names originated the same way.

6For a more detailed explanation of the business cycle, see Murray N. Rothbard, America’s Great Depressiom, (Nash Publishing, 1963).

7Ludwig von Mises, Human Action (Henry Regnery, 1963) p.560.

8Lawrence W. Reed and Dale M. Haywood, When We Are Free (Northwood Institute Press, 1981). p. 125.

9Henry Hazlitt, What You Should Know About Inflation (Funk and Wagnalls,1968), p. 131.

10Ibid., p. 151.

11For an in depth analysis, see Hans Sennholz, “No Shortage of Gold,” in Hans Sennholz (ed.) Gold Is Money (Greenwood Press, 1975).

12In principle, money substitutes that are fully backed by commodity money (like a warehouse receipt) would also be honest money.  That is, money certificates would not violate God’s law.  Their issuance would not change the outstanding quantity of money.

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